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INTRODUCTION TO ASPECTS OF CONTRACT
English law is the basis of common law in Wales and England. It is the mixture of legislation passed by the Parliament of UK, common law, the European law. The decision taken by Supreme Court of the United Kingdom is binding on the hierarchy of other courts (Slapper and Kelly, 2011.). In this context, present report is prepared to evaluate the essential elements required for formation of legally binding contracts and the different types of contracts that exist. In addition to this, strength and limitation of contracts, their terms as well as their effects are discussed. The rules of offer and acceptance in the given scenario and the difference between liability in tort and contractual liability are analyzed. The elements of tort of negligence and the fundamentals of vicarious liability are also evaluated.
TASK 1 ELEMENTS OF VALID CONTRACT
A legally binding agreement between two or more entities giving rise to obligations which may be imposed in the courts is known as contract. Parties enter into a contract to do something in exchange of valuable benefits which is known as consideration. Essential elements for formation of valid and legally binding agreement are enumerated below:
Offer: This can be understood as the explicit proposal which is made by offerer and when it is accepted by offeree then it completes the contract (Luo, 2002). This legally binds the offerer and offeree.
Acceptance: It is an implication by conduct or by express act that shows the consent of offeree for terms of contract in a required manner so as to form legally binding contract.
Intention to create legal relations: It is one of the necessary fundamentals for formation of contract. This consists of willingness of offeree to accept the legal terms to enter into the contract.
Consideration: It can be understood as something of value given by both the parties that encourage them to enter into the contract.
Capacity of parties: In order to form a valid contract, parties should have the competency capacity as they need to be of required age, not expressly declared void by any law and should be of sound mind (Deaki and et.al. 2007).
Errington v Errington Woods (1952) 1 KB 290, under this scenario, a house was purchased by father-in-law for his son and daughter-in-law to live in. The house was in the name of father and deposit was paid by him as a gift of wedding. He promised that if mortgage installments were paid by couple then he would transfer the house to them. The father died and the mother inherited the house. The son wants to live with mother after death of father but wife refuses to live with mother and she continues to pay the installments. Hence, there was a unilateral offer made by father that was accepted by couple by paying mortgage and therefore wife was entitled to remain in the house as there was intention to create legal relations.
Lampleigh v Braithwaite (1615) EWHC KB J17, in this scenario, a man was killed by defendant and hence the defendant was supposed to be hung for murder. The defendant asked the claimant to do everything to obtain a pardon and therefore claimant went to great efforts for the requested pardon. The promise was made by defendant that he will pay £100 to claimant for his efforts but never paid. Under this situation, consideration was valid as it was paid at the request of defendant.
Contract is a lawfully binding agreement between two or more parties to do something in exchange of valuable benefits which is known as consideration. There are different types of contracts that are enumerated below:
Oral contract: An agreement between two or more parties in which terms of contract take place through spoken words are known as oral contract (Harpwood, 2009). For example: Tom wants to buy book from Arnold and therefore he made an offer and on the other hand Arnold accepted that offer. Hence, oral contract will take place between both the parties as sale of textbook does not require written documentation.
Written contract: The contract between two or more entities in which terms are introduced through written documentation is referred as written contract. This can be used by parties as proof in case of fraud. For instance Neal wants to sell his house and therefore he made an offer through advertisement in newspaper. On the other hand, Karen read the newspaper and accepted the offer. Therefore the sales transaction between Neal and Karen regarding sale of house will take the form of written contract as transfer of ownership will require written documentation.
Unilateral contract: This is a one sided contract under which promise is made by offerer in exchange of the act of another person. In this type of contract, only one pays another to perform certain duty (Partington, 2013). For example John promises to William that he will pay £1000 if he will bring his car from San Francisco to Cleveland. Bringing car by William is referred as acceptance.
Bilateral contract: It is the mutual arrangement between two or more entities in which they promise to perform specific acts in exchange of other's act. Under this type of contract, each party is obliged for their own promise. For instance Joseph promises to pay the car washer £15 in exchange for the promise of car washer as he will clean his car.
Term is the provision forming part of contract which gives rise to legal obligations. It is the essential part of an agreement and they are of different types. Some of them are enumerated below:
Condition: It is the essential part of formation of contract as it is the major term which goes to the root of the agreement. In addition to this, breach of condition gives right to the injured party to release the contract (Faure, 2009). Poussard v Spiers (1876), 1 QBD 410, in order to perform as an opera singer for three months Madame Poussard entered a contract. Five days before the opening night, she became ill and was not able to perform. She was than replaced by Spiers for another opera singer. There was a breach of condition done by Madame Poussard and therefore Spiers were entitled to release the contract.
Warranty: This is less significant than condition as it is the minor term of contract and it is not central to the formation of contract. In case of breach of warranty, the innocent party is permitted to claim for damages suffered by them. Bettini v Gye (1876) QBD 183, in this scenario Bettini agreed to enter into a contract for three months period to perform as opera singer. Due to illness he missed the rehearsals of 6 days. On the other hand, employer discharged him and replaced Bettini with another opera singer. In this situation, Bettini was in breach of warranty and therefore employer was not allowed to release the contract.
Innominate term: This term was developed in the case of Hong Kong Fir Shipping. It is an implied term which is neither a warranty nor a condition but somewhere in between them (Kelly and et.al. 2013). Hong Kong Fir Shipping v Kawasaki Kisen Kaisha (1962) 2 QB 26, in this case scenario, for period of two year a ship was chartered to the defendants. The agreement contains the term of contract that ships would be seaworthy in the period of hire. During this period of contract a problem was developed with the engine and it became incompetent. In the duration of 15 week s, the ship was out of service for 5 weeks and this was treated as the breach of condition by defendant. An action was brought by claimant for unfair disclaimer. The claimant argued that term of contract regarding seaworthiness was not a condition.
In the given case, John wrote an advertisement in order to sell his Mini Cooper for £6,000. He uploaded the advertisement on a website and left his email address for potential buyers. He got an email from Kirsty on Wednesday in which she showed interest to buy his car. Later that day, John replied and asked her that when she wants to buy it and how she will pay for it. Kirsty emailed back on Wednesday that she will come on Saturday and would like to buy in cash. On the other hand, John never received this email and sold the car to another person on Friday as he assumed that Kirsty was no longer interested. When Kirsty went to collect the car on Saturday, John told her that he had now sold the car.
Rules of offer and acceptance
Offer: It is an expression of readiness on certain terms of agreement which is made with the intention to create legally binding contract by the individual for whom it is addressed. Expression can take different forms such as fax, email, letter, conduct and newspaper. This may be implied or expressed and should give rise to legal consequences and parties should be able to create lawful relations (Plimpton, 2007). In addition to this, terms of contract must be certain and should be made with an aim to gain the consent of another party without being forced. Offer can be made to conditions and terms. It communicates the root on which offerer is prepared to agreement. In the given scenario of John and Kirsty and offer was made by John through advertisement on website. The offer made by John contains that he wants to sell his Mini Cooper at £6,000 and left his email address for potential buyers.
Acceptance: It is an unqualified and final expression of consent by offeree to the terms of offer. It is essential that parties engaged in the contract must mark their assent. The person for whom the proposal is made signifies his consent to the terms of offer than it is known as acceptance. It is essential that acceptance given by offeree must be unqualified and absolute. In addition to this, acceptance should be communicated by offeree and should be given within the stipulated and reasonable time period. This should succeed the offer. As per the provided case scenario, an offer was made by John for the sale of his car and on the other hand Kirsty shoed interest to buy his car. Kirsty emailed John that he saw his advertisement for the car and it was exactly the same which she was looking for and she like to buy it. On the other hand John replied that thanks for getting touch and ask her that when she would like to come and pick up the car and how she would like to pay. Kirsty emailed John that she would pay in cash and would come on Saturday to collect the car but John never received the email and therefore he sold the car to another person. Hence, Kirsty did not given his assent on reasonable time period for the purchase of car and therefore John sold it to another part. There was no contract between John and Kirsty and due to this Kirsty is not entitled to claim against John.
In the given scenario Adam decided to go to Switzerland on a skiing trip. A lengthy document was signed by Adam that contained the rules regarding skiing. The 20th page of the booklet involved the terms of contract which stated that no liability will be accepted for any breach of contractual terms and any damages or injuries to the property on their premises.
The term of contract in the given scenario was exclusion clause as they excluded their liability. The 20th page of booklet states that no liability will be accepted for any injury or damage to the property (Hernandez, 2010). Exclusion clause states that occupier can exclude the liability to certain extent but in situation of personal injury or death of a person, the occupier cannot limit the liability.
Case law: L'Estrange v Graucob (1934) 2 KB 394, in this scenario a cigarette vending machine was purchased by claimant for her cafe. An order form was signed by her that stated that any implied, express, warranty, condition and other statutory is expressly excluded. Claimant sought to reject the vending machine under the Sale of Goods Act as the machine did not work. The claim was unsuccessful as she signed the order form that contained the terms of contract irrespective of whether the form was read by her or not.
Under the given scenario a dress was purchased by Jasmine from Boohoo, an online shop. In order to complete the transaction, she was required to agree to the terms of contract by ticking a box. The contract states that they may change the color or size of the item. In order to complete the purchase, Jasmine did not read this term and tick the box (Taylor, 2011).
The term of contract in the given scenario was warranty as they provided the option that color or size of the dress can be changed. The breach of term permits injured party to claim for damages in case of warranty. In the given situation, if Jasmine did not like the color of dress or the size of dress may not fit to her than in that condition, she is allowed to claim for damages as she is permitted to change the color or size.
Case law: Bettini v Gye (1876) QBD 183, in this scenario a contract was signed by Bettini to perform an opera singer for the period of three months. He missed the rehearsals of 6 days due to illness and therefore employer dismisses him and appointed another opera singer. Under the given situation the term of contract was warranty and breach of these terms allowed injured party to ask for damages. Bettini claim against employer as there was breach of warranty and in the situation employer was not entitled to terminate the contract.
Tort is never based on the mutual consent of parties as it is the civil wrong. The damages are awarded to the victim under the situation of tort is to compensate their losses. When a person fails to perform duty of care than in that situation tort takes place as it cause harm to another. Case Precedent: Blake v Galloway (2004) CA.
On the other hand contractual liability is based on the assent of parties. When there is lawful agreement between two or more parties than it gives rise to contractual obligations and it takes place when one party fails to perform the terms of agreement in appropriate manner (Levinson, 2005).
Case Precedent: Merritt v Merritt (1970) 1 WLR 121
The parties entering into the contract are required to perform duty of care in order to remove the chances of occurrence of any injury or harm to another party. The negligence into contract takes place when one party fails to perform their duties with care (Palmer, 2014). In the situation of liability in negligence, a principle law was developed which states that entities entered into the contract have legal obligations to perform their duties with care so as to not cause any harm or injury to another. Donoghue v Stevenson (1932) AC 562, in this scenario a snail was occurred in the ginger bear of Donoghue which cause personal injury. The manufacture of ginger bear negligently performs their duties of care and therefore they were liable to pay damages to Mrs. Donoghue.
Vicarious liability is a situation under which one person is held liable for the negligent act of another party. It is the legal doctrine that allocates liability to one party who did not cause the injury but have lawful relation with the party who perform their duties negligently and harm other (Gray, 2010). The vicarious liability takes place in the situation of employer employee relationship as there is legal relationship between both the contracting parties. Home Office v Dorset Yacht (1970) HL, under this scenario some young offenders stole a boat while working at Brown Sea Island and therefore Borstal officers were held vicarious liable for the acts of offenders as there was lawful relations.
When obligations and duties perform by parties negligently than in that situation tort of negligence takes place. The four elements of tort of negligence are enumerated below:
Presence of duty of care: The plaintiff is needed to show that defendant has owned the duty of care in the situation of personal injury.
Breach of duty of care: In the situation of breach of duty of care, plaintiff is required to show that duty of care is owned by defendant (Plimpton, 2007).
Factual causation: The plaintiff is also needs to provide that injury is caused by the negligent acts of defendants. This will assist in claiming the damages against defendant.
Damages: It is the last essential element of tort of negligence under which plaintiff is required to develop the actual loss or harm suffered by him or her.
Hence, from the above discussion it can be stated that injured part is required to incorporate these elements of tort of negligence in order to claim damages and to receive compensation.
Vicarious liability can be understood as a situation under which one party is held accountable for the negligent or illegal act of another due to lawful relationship with that person. The elements of vicarious liability are as follows:
- The employer has the authority to control the acts of their employees so that they perform their duties in effective manner (Taylor, 2011).
- It is essential that work of employee must be in the scope of their employment.
- There should be lawful agreement between employees and employer.
From the above report it can be concluded that there are different types of contract takes place between two or more parties such as oral, written, unilateral and bilateral and the parties should incorporate the essential elements of valid contract in order to create legal relations.
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- Faure, M., 2009. Tort law and economics. Edward Elgar publishing.
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- Harpwood, H. V., 2009. Modern tort law. Routledge.
- Kelly, D. and et.al., 2013. Business Law. Taylor & Francis.